Situation in microfinance market improves
By Leman Mammadova
The presidential decree on problem loans had a positive effect on the banking sector, including the microfinance market, said Jalal Aliyev, deputy chairman of the Azerbaijan Micro-finance Association (AMFA).
He told Trend that this decree resolved the problems of majority of the borrowers. The deputy chairman noted that relieving the credit burden of borrowers will enable them to become new potential clients of non-bank credit institutions and other financial institutions.
Aliyev added that this decree will also positively affect the liquidity of banks and non-bank credit organizations. “Borrowers' loan funds will be restructured on concessional terms within this decree, which will positively affect the growth of liquidity of financial institutions.”
“We consider that a low interest rate in this sector can be another positive result of the decree, which in turn will open up broad opportunities for the allocation of additional loan funds for small and micro businesses. Until the end of the year, the market growth is expected to be at least 15-20 percent,” he noted.
Deputy chairman further stressed that to date, the main problem of microfinance organizations was associated with a lack of funds.
“After devaluation, crediting was carried out exclusively in manat. The delays of that period in credit institutions caused the alienation of foreign investors, lenders and financial funds,” he said, noting that the decree on problem loans mostly solves this problem and new lending became available for debtors.
Aliyev added that another important aspect is that borrower’s revenue becomes more transparent. “The point is that the incomes of small and micro businesses must be registered, so that they can be analyzed for compliance with lending. This is mainly carried out through tax accounting.”
“I think that the reforms in the tax sector will affect the growth in the number of entrepreneurs registered in tax accounting. Thus, the existing potential will increase, the customer base will expand,” said the deputy chairman.
He went on to note that AMFA holds meetings with the Financial Market Supervisory Authority of Azerbaijan (FIMSA) in terms of the development of the market. “As the Association, we summarize our recommendations on behalf of the microfinance sector and submit them to FIMSA.”
Aliyev added that one of them is the opening of accounts for borrowers by non-bank credit and financial organizations for their activities within the country. “This will allow us not only to lend, but also to support debtors in small settlements within the country.”
Earlier, Azerbaijani President Ilham Aliyev signed a decree on additional measures in connection with solving the issue of the individuals’ problem loans. The decree envisages the payment of compensation to citizens whose loan burden increased as a result of the devaluation of the manat in February and December 2015.
The payment of compensations for problem loans to individuals in Azerbaijan began on April 22. The payments are made through branches of banks and Azerpost postal operator.
Microfinance organizations have always played a special role in the development of Azerbaijan’s economy, reducing poverty and supporting entrepreneurship. At present, the loan portfolio of microfinance organizations in Azerbaijan amounts to $273 million.
On December 19, 2001, a number of organizations signed a memorandum of understanding incorporating into the Azerbaijan Micro-finance Association.
The main mission of AMFA is to strengthen the potential of microfinance organizations in the country and create conditions for joint rational activities within the interests of the microfinance community. AMFA currently includes 35 structures, including commercial banks, NBCOs, credit unions, insurance companies, leasing companies, and others.
Microfinance refers to an array of financial services, including loans, savings and insurance, available to poor entrepreneurs and small business owners who have no collateral and wouldn't otherwise qualify for a standard bank loan.
The goal of microfinance is to create a highly dynamic and efficient system of lending to small enterprises to further stimulate the production and distribution of goods and services, and to help start-up entrepreneurs in acquiring the experience of making a profit and accumulating capital.
This financial service is mostly in demand in the countries with developing economies, because it helps solve many problems of national importance.
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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888
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